Investment will result in improved mobile performance as Samsung moves to a 20nm and 14nm manufacturing process

The company announced this morning the money will mainly go towards producing advanced mobile application processors on 300mm wafers using 20nm and 14nm production processes. The expansion will break ground in Hwaseong, South Korea this month and be completed by the end of 2013, if everything goes according to plan, Samsung said.

Moving to 20nm and 14nm processes will likely result in a big performance jump for Samsung, as transistors become smaller and less power-hungry. Samsung's Exynos 4 Quad processor, used in its Galaxy S III smartphone, is built using a 32nm process.

Also, earlier this week ARM said that 20nm processors could appear in smartphones and tablets by the end of 2013. Samsung's processors are based on ARM technology.

Samsung is stepping up its chipset push in both technology and manufacturing.

Besides the investment at Hwaseong, the company is also planning to build a new NAND Flash plant in Xi'an, China. Last week, Samsung also acquired Nanoradio, a Swedish company that develops energy-efficient chipsets for Wi-Fi.

The overall market for mobile processors - used in e-readers, handheld game consoles, mobile PCs, portable media players, smartphones and tablets - will reach 1.9 billion units annually by 2016, growing by an average of 22% per year, according to market research company In-Stat.

Smartphones and tablets represent the greatest opportunity for growth with a combined 75% growth in 2011 and an annual growth of about 29% through 2016, it said.

The overall market value for smartphone and tablet semiconductor chips is forecast to be $59.4 billion by 2016, compared to $23.4 billion in 2011, according to market research company Gartner.